NAME: ___________________________________________________

ACC316/413: SEMI FINAL EXAMINATIONM

UNIVERSITY OF LUZON
COLLEGE OF ACCOUNTANCY

Instruction: You are allowed 50 minutes to answer this test. Deduction of one point per minute will be imposed
for late submission.

1. If P50.00 can be exchanged for 1 US dollar, the direct and indirect exchange quotations are:
a. P50.00 and 1US dollar, respectively c. P 1.00 and 50 US dollar, respectively
b. P50.00 and .02 US dollar, respectively d. P 1.00 and .02 US dollar, respectively

2. A local firm purchases from a Canadian firm with payments due in 60 days and denominated in Canadian
dollars. The local firm will report an exchange gain or loss on settlement if the transaction is:
a. Recorded in Philippine pesos
b. Measured in Philippine pesos
c. Net hedge thorough a forward contract
d. Settled after an exchange rate change has occurred.

3. Exchange gains and losses on accounts receivable and payable that are denominated in foreign currency are:
a. Accumulated and reported upon settlement
b. Deferred and treated as transaction price adjustments
c. Reported as equity adjustments form translation
d. Recognized in the periods in which exchange rates change

4. Which of the following combinations correctly describes the relationship between foreign currency
transactions, exchange rates changes, and foreign exchange gains and losses?
Transaction Foreign currency Forex gain or loss
a. Export sale Appreciates Loss
b. Import purchase Appreciates Gain
c. Import purchase Depreciates Gain
d. Export sale Depreciates Gain

5. In accounting for foreign currency transactions, which of the following approaches is more generally accepted
practice?
a. One – transaction perspective; accrue foreign exchange gains and losses
b. One – transaction perspective; defer foreign exchange gains and losses
c. Two – transaction perspective; defer foreign exchange gains and losses
d. Two – transaction perspective; accrue foreign exchange gains and losses

6. Which of the following is not a primary indicator of an entity’s functional currency?

a. The currency that mainly influences the sales price for goods and services.
b. The currency of the country whose competitive forces and regulations mainly determine the sales prices
of its goods and services.
c. The currency that mainly influences labor, material and other costs of providing goods and services.
d. The currency in which funds from financing activities are generated.

7. A Philippine manufacturing company has sold computer services to a foreign firm and received 200,000
foreign currency units (FCs). The exchange rates were 1 FC = P.75 on the date of the sale and 1 FC = P.80 when
the receivable was settled. On the transaction date, the settlement exchange rate is estimated to be 1FC = P.72.
By the settlement date, what is the total exchange gain or loss recorded for the transaction if the two-
transaction method is used?
a. P10,000 exchange gain c. P10,000 exchange loss
b. P6,000 exchange loss d. no gain or loss

8. A Philippine manufacturer has sold goods to a foreign firm for a sale price of 80,000FC on 12/15/2020. The
invoice is due 1/15/2021. The fiscal year is 12/31/2020. Given the following exchange rates, what gain or
loss would the firm record on 12/31?
12/15 1FC = P0.60
12/31 1FC = P0.65
1/15 1FC = P0.63

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NAME: ___________________________________________________
ACC316/413: SEMI FINAL EXAMINATIONM

a. loss of P4,000 c. gain of P2,400

b. loss of P1,600 d. gain of P4,000

9. Hug, Inc. purchased merchandise for 300,000 FC from a British vendor on November 30, 2020. Payment in
British pounds is due January 31, 2021. Exchange rates to purchase 1 FC is as follows:
Nov. 30, 2020 Dec. 31, 2020
Spot. P1.65 P1.62
30 day P1.64 P1.59
60 day P1.63 P1.56
In the December 31, 202020 income statement, what amount should Hug report as foreign exchange gain
from this transaction?
a. P12,000 b. P9,000 c. P6,000 d. P0

10. On September 1, 2020, Bain Corporation received an order for equipment from a foreign customer for 300,000
foreign currency units (FCU), when the Philippine peso equivalent was P96,000. Bain shipped on October 15, 2020
and billed the customer for 300,000 FCU when the Philippine peso equivalent was P100,000. Bain received the
customer remittance in full on November 16, 2020 and sold the 300,000 FCU for P105,000. In its income statement
for the year ended December 31, 2020, Bain should report a foreign exchange gain of:
a. P0 b. P4,000 c. P5,000 d. P9,000

11. On September 22, 2020, Yani Corporation purchased merchandise from an affiliated foreign company for
10,000 units of foreign company’s local currency. On that date, the spot rate was P.55. Yani paid the bill in full
on March 20, 2021, when the spot rate was P.65. The spot rate was P.70 on December 31, 2020. What amount
should Yani report as a foreign currency transaction loss on its income statement for the year ended December
31, 2020?
a. P0 b. P500 c. P1,000 d. P1,500

12. On July 1, 2020, Clark Company borrowed 1,080,000 foreign currency units from a foreign lender, evidenced
by an interest – bearing note due on July 1, 2021, which is denominated in the currency of the lender. The
Philippine peso equivalent of the note principal was as follows:
July 1, 2020 (date borrowed) P210,000
December 31, 2020 (Clark’s year end ) 240,000
July 1, 2021 (dated paid) 280,000
In its income statement for 2021, what amount should Clark include as foreign exchange gain or loss?
a. P70,000 gain b. P70,000 loss c. P40,000 gain d. P40,000 loss

13. On July 1, 2020, Stone Company lent P120,000 to a foreign supplier, evidence by an interest bearing note due
on July 1, 2021. The note is denominated in the currency of the borrower and was equivalent to 840,000
foreign currency units on the loan date. The note principal was appropriately included at P140,000 in the
receivables sections of Stone’s December 31, 2020 balance sheet. The note principal was repaid to Stone on
July 1, 2021 due date, when the exchange rate was 8 foreign currency units to P1. In its income statement for
the year ended December 31, 2021, what amount should Stone include as a foreign currency transaction gain
or loss?
a. P0 b. P15,000 loss c. P15,000 gain d. P35,000 loss

14. On December 5, 2020, Melnick Corporation, a Pinoy firm, bought inventory items from Imental Corporation
of France for 1,000,000 French Francs when the spot rate for Francs was P0.168. At Melnick’s December 31,
year – end, the spot rate was P0.167. On January 4, 2021, Melnick purchased 1,000,000 francs for P167,500
and paid the invoice. How much gain or loss should Melnick report in its 2020 and 2021 income statements?
a. Nothing in 2020; P500 gain in 2021 c. P1,000 loss in 2020; P500 gain in 2021
b. P1,000 gain in 2020; P500 loss in 2021 d. Nothing in 2020; P500 loss in 2021

Use the following information for next two questions.

On November 1, 2020, Meade Corporation sells merchandise to Hirsch Corporation, a German firm. Meade
measures and records the account receivable from the sale at P156,000. Hirsch pays for this account on
November 30, 2020. Spot rates for German marks on November 1 and November 30 are P0.80 and P0.78,
respectively.
15. If the sale of the merchandise is denominated in marks, the November 30 entry to record the receipt of
payment from Hirsch will include a;
a. Credit to accounts receivable for P152,100 c. Debit to cash for P156,000
b. Credit to exchange gain for P3,900 d. Debit to exchange loss for P3,900

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NAME: ___________________________________________________
ACC316/413: SEMI FINAL EXAMINATIONM

16. If the sale of the merchandise is denominated in pesos, the November 30 entry to record receipt of the
payment from Hirsch will include a;
a. A debit to cash for P156,000 c. A credit to exchange gain for P3,900
b. A debit to cash for P152,100 d. A credit to accounts receivable for P152,100

17. Richie Corporation sold merchandise to Sanchez Company for 300,000 Mexican pesos when the exchange
rate was 1 peso = P.102. Mexican pesos were received when the exchange rate was 1 peso = P.105. What is
the peso amount of debit to cash at the date of collection?
a. P31,500 b. P2,857,143 c. P30,600 d. P2,941,176

18. Quest Industries purchased inventory for 130,000 Canadian dollars when the exchange rate was 1 Canadian
dollar = P.62. The exchange rates on the balance sheet date and the payment date were 1 Canadian dollar
=P.64 and P.65, respectively. What is the amount of the gain or loss recognized on the balance sheet date?
a. P3,900 gain b. P3,900 loss c. P2,600 gain d. P2,600 loss

19. On June 1, 2020 Jordan received merchandise from a British company with an invoice for 40,000 British
pounds. The spot rate for the pound on June 1 was P1.56 but on August 1 when the invoice was paid, the spot
rate for the pound was P1.60. At year end the spot rate for the British pound was P1.58. At what amount
should Jordan report an exchange gain or loss on the transaction for 2020?
a. Gain of P1,600 b. Loss of P1,600 c. Gain of P800 d. Loss of P800

20. On May 1, 2020 Cosmo Corporation purchased merchandise from a French firm for 396,000 French francs
when the spot rate for Francs was 5.200 per peso. The account payable was denominated in francs. Cosmo
settled the account on September 1, when the spot rate for francs was 5.345 francs per peso. How much cash
will Cosmo have to disburse to settle the account?
a. P74,087.93 b. P76,153.85 c. 395,000.00 d. P2,055,040.00